Market Talk – May 27, 2020

ASIA:

Tensions between China and India over their Himalayan border have escalated, with China accused of moving thousands of troops into disputed territory and expanding a military airbase in the region. An online news agency reported that thousands of Chinese People’s Liberation Army (PLA) troops have moved into sensitive areas along the eastern Ladakh border. In response, the Indian army has moved several battalions from an infantry division usually based in the Ladakh city of Leh to “operational alert areas” along the border, and reinforcement troops have been brought in.

Indian stocks were higher after the close on Wednesday, as gains in the banking, IT, and carbon sectors led shares higher. At the close in NSE, the Nifty 50 rose 3.17%, while the BSE Sensex 30 index gained 3.25%.

India may need to inject approx. 19.81 billion USD into its Public Sector Banks as their pile of bad loans is expected to double during the coronavirus pandemic, three government and banking sources told Reuters. The loan defaults is likely to rise as businesses take a severe hit from nationwide lockdowns to tackle the coronavirus.

Uber Technologies Inc has cut about 600 jobs in India as part of plans to reduce its global workforce by 23%, the company said on Tuesday, joining local rival Ola as the COVID-19 pandemic crushes demand for app-based cab services. Last week, Uber said it would focus on its core businesses in ride-hailing and food delivery and cut staffing globally in an attempt to become profitable despite the coronavirus pandemic.

The Russian head of coronavirus information has played down the global fears over COVID-19. He claimed that the virus caused minimal deaths, and said it is merely an accute respiratory disease. He also said he is confused as to why the whole world economy was destroyed over the virus.

The major Asian stock markets had a mixed day today:

  • NIKKEI 225 increased 148.06 points or 0.70% to 21,419.23
  • Shanghai decreased 9.74 points or -0.34% to 2,836.80
  • Hang Seng decreased 83.30 points or -0.36% to 23,301.36
  • ASX 200 decreased 5.00 points or -0.09% to 5,775.00
  • Kospi increased 1.42 points or 0.07% to 2,031.20
  • SENSEX increased 995.92 points or 3.25% to 31,605.22

The major Asian currency markets had a mixed day today:

  • AUDUSD decreased 0.00447 or -0.67% to 0.66022
  • NZDUSD decreased 0.00259 or -0.42% to 0.61736
  • USDJPY increased 0.17 or 0.16% to 107.66
  • USDCNY increased 0.03565 or 0.50% to 7.18120

Precious Metals:

  • Gold increased 1.65 USD/t oz. or 0.10% to 1,712.80
  • Silver increased 0.16 USD/t. oz or 0.96% to 17.2740

Some economic news from last night:

China:

Chinese Industrial profit (YoY) (Apr) increased from -34.90% to -4.30%

Chinese Industrial profit YTD (Apr) increased from -36.7% to -27.4%

South Korea:

Manufacturing BSI Index (Jun) remain the same at 45

Australia:

Construction Work Done (QoQ) (Q1) increased from -3.0% to -1.0%

EUROPE/EMEA:

The European Commission has proposed a plan for a 750 Bn euro economic recovery package. The package will compromise of 500 Bn euros of grants and 250 Bn euros in loans and will be shared amongst all 27 member states. The funds will be added to the EU budget for the years 2021-27, making the total 1.85 trillion euros. Still, all member states must agree on the finalized package. Member states such as Austria and Netherlands have already expressed concerns about comingled debt. Ursula von der Leyen has called the pandemic as an unprecedented crisis and hopes the package shown will satisfy all member states. She was adamant that this was Europe’s moment and that this crisis was bigger than any single country. The plan is to have the package agreed upon within the next three weeks at the upcoming leaders’ summit.

Northern Ireland could benefit from the Brexit deal by having the right to have access to both the UK and EU markets, but would have to have to adhere to EU rules on agriculture at the NI border. Meanwhile, Michael Barnier said that the EU would be open to an extension to the Brexit transition period of up to two years.

The major Europe stock markets had a green day today:

  • CAC 40 increased 82.50 points or 1.79% to 4,688.74
  • FTSE 100 increased 76.49 points or 1.26% to 6,144.25
  • DAX 30 increased 153.04 points or 1.33%% to 11,657.69

The major Europe currency markets had a mixed day today:

  • EURUSD increased 0.00069 or 0.06% to 1.09865
  • GBPUSD decreased 0.00825 or -0.67% to 1.22487
  • USDCHF increased 0.00312 or 0.32% to 0.96864

Some economic news from Europe today:

France:

French Business Survey (May) increased from 68 to 70

French Consumer Confidence (May) decreased from 95 to 93

Norway:

Core Retail Sales (MoM) (Apr) increased from -0.9% to 4.8%

Unemployment Rate (Mar) increased from 3.5% to 3.6%

Swiss:

ZEW Expectations (May) increased from 12.7 to 31.3

US/AMERICAS:

Secretary of State Mike Pompeo announced to Congress this Wednesday that the US no longer view Hong Kong as an autonomous country due to China’s new policies. Although the secretary advocated for an independent Hong Kong, he announced that the nation will lose its special trading status. “While the United States once hoped that free and prosperous Hong Kong would provide a model for authoritarian China, it is now clear that China is modeling Hong Kong after itself,” Pompeo declared.

Twenty-three US states filed a lawsuit against the Trump administration this Wednesday for lowering the fuel requirements implemented under the Obama administration. In 2012, Obama required vehicles to average 46.7 mpg, which was eased to 40.4 mpg under Trump. Michigan Attorney General Dana Nessel accused Trump of giving “a gift to the fossil fuel industry.” However, the Trump administration claims the ruling will help consumers by lowering gas payments, and will save automakers billions in regulatory fees.

NASA’s SpaceX launch this Wednesday marked the first time in nine years that astronauts ascended to space from American soil. Update: the launch was postponed due to poor weather conditions. The spacecraft will now launch on Saturday, May 30, at 3:22 PM ET.

The Trump administration is aiming to bring American troops home from Afghanistan. “We are acting as a police force, not the fighting force that we are, in Afghanistan. After 19 years, it is time for them to police their own Country. Bring our soldiers back home but closely watch what is going on and strike with a thunder like never before, if necessary!” the President Tweeted on Wednesday.

Disney Chief Executive Officer Robert Chapek announced plans to reopen Disney World on July 11. Guests and employees will be required to wear masks and must agree to have their tempature taken before entering the park. The CEO noted that Shanghai Disneyland’s reopening on May 11 was a success, as it now attracts around 20,000 visitors daily.

Foreign holdings of Brazilian bonds dropped to their lowest level since 2009, according to Reuters. Foreign holdings were reduced by 24.3 reais ($4.6 billion) this April, and dropped by 56 billion reais throughout the course of the year. Brazil had aimed to attract foreign investments, pitching proposals to China, India, and the US. Still, the Treasury said that the country’s federal debt is at a record low of 8.03% and feels the country is well poised to handle the bond sell-off.

US Market Closings:

  • Dow advanced 553.16 points or 2.21% to 25,548.27
  • S&P 500 advanced 44.36 points or 1.48% to 3,036.13
  • Nasdaq advanced 72.14 points or 0.77% to 9,412.36
  • Russell 2000 advanced 43.28 points or 3.11% to 1436.36

Canada Market Closings:

  • TSX Composite advanced 123.91 points or 0.82% to 15,272.03
  • TSX 60 advanced 8.98 points or 0.98% to 924.65

Brazil Market Closing:

  • Bovespa advanced 2,477.34 points or 2.9% to 87,946.25

ENERGY:

The oil price rally came down today after Russia signaled the end of production cuts and suggested that they will resume or increase production by the end of June. Brent is currently hovering just under 35 USD per barrel.

The oil markets had a negative day today:

  • Crude Oil decreased 1.81 USD/BBL or -5.27% to 32.5400
  • Brent decreased 1.68 USD/BBL or -4.64% to 34.4900
  • Natural gas decreased 0.07 USD/MMBtu or -3.89% to 1.7050
  • Gasoline decreased 0.049 USD/GAL or -4.72% to 0.9890
  • Heating oil decreased 0.022 USD/GAL or -2.23% to 0.9649

The above data was collected around 14.42 EST on Wednesday.

  • Top commodity gainers: Ethanol (5.82%), Palm Oil (3.42%), Live Cattle (1.72%), and Feeder Cattle (1.16%)
  • Top commodity losers: Crude Oil (-5.27%), Gasoline (-4.72%), Brent (-4.64%), and Natural Gas (-3.89%)

The above data was collected around 14.45 EST on Wednesday.

BONDS:

Japan 0.01%(+1bp), US 2’s 0.17% (-1bps), US 10’s 0.67%(-3bps); US 30’s 1.43%(-1bps), Bunds -0.42% (+1bp), France -0.01% (-2bp), Italy 1.51% (-5bp), Turkey 12.08% (-11bp), Greece 1.58% (-7bp), Portugal 0.65% (-5bp); Spain 0.65% (-4bp) and UK Gilts 0.19% (-2bp).

  • Italian 6-Month BOT Auction decreased from 0.227% to 0.012%
  • US 5-Year Note Auction decreased from 0.394% to 0.334%